2 hedge fund managers are charged with fraud

CHICAGO TRIBUNE

A federal grand jury indictment unsealed Tuesday accused two former business partners of cheating wealthy investors out of more than $13 million by luring them to invest in a securities hedge fund they managed.

The former partners, Scott Bell and Scot Rubel, are accused of defrauding 32 investors by making false statements about their backgrounds and about the hedge fund's trading record, assets and profitability from April 1995 through June 1996, according to the indictment.

According to the indictment, Bell and Rubel lured potential investors by falsely telling them their fund had stellar financial performance in 1993, 1994 and 1995 and had "outpaced the S&P 500." However, the indictment alleges, the hedge fund didn't exist until 1995.

The criminal charges unsealed Tuesday follow a sweeping investigation by the Securities and Exchange Commission in 1996 alleging securities fraud involving the now-defunct hedge fund, Theta Group LLC. The SEC then filed a civil lawsuit against Theta Group and froze its assets.

Bell, 40, who lives in Hungary, and Rubel, 37, of Barrington had managed the Theta Group. They were charged with four counts of mail fraud and four counts of securities fraud, said Assistant U.S. Atty. Eric Wilson.